As the European debt crisis lurches into its third year, super-rich China finds itself with cash-strapped European suitors lining up on its doorstep. With $3.2 trillion in foreign exchange reserves, China appears to be in prime position to provide a lifeline to the debt-beleaguered continent. Prime Minister Wen Jiabao recently pledged China's aid, but his vague promise didn't entail any firm commitments, and many Chinese officials are still wary of exposing the country to risky bonds from Greece and other debt-burdened European nations. But maybe they should think again. Here, three reasons why China would be wise to rescue Europe:
1. If Europe falters, it would cripple China's economy
China's economic growth could be cut in half if the eurozone enters a recession, warns the International Monetary Fund. With annual trade valued at 560 billion euros ($730 billion), Europe is China's largest trading partner. In addition, Chinese business investments in Europe more than doubled from 2010 to 2011. Propping up Europe now could forestall a far-more-expensive economic collapse down the road.
2. China could gain political leverage over the West
In "desperate need of financial support," Europe might be willing to make big political concessions to China, writes Thomas H. Naylor at CounterPunch. For instance, as a prerequisite for aid, China demand that the West quit threatening Iran over its nuclear program. Such a move would "effectively checkmate" the U.S. and Israel. "All of this makes Washington very nervous," and the U.S. "does not relish the thought of the EU becoming financially dependent on Beijing."
3. China could also bolster its clout at the IMF
China should "pony up," writes Wayne Arnold at Reuters, but buying European bonds directly is "too risky." Instead, China should funnel its aid through the IMF — and thereby earn a "bigger role at the world's currency watchdog." The U.S. dollar is still the world's reserve currency, which leaves China vulnerable to the whims of U.S. monetary policy. China views the IMF as the "best counterbalance to such tides," and winning more influence at the powerful organization ought to be a "no-brainer."
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- The mystery behind China's aggressive push into space
- The best places to find love — and lust — according to science
- How a drafting error could doom Obama's carbon regulations
- Sex can't explain the culture war
- What would a U.S.-Russia war look like?
- Here's the schedule very successful people follow every day
- This simple hack for slicing cherry tomatoes will astound you
- How the battle for religious freedom became a nonsensical free-for-all
- Why GOP reformers are bound to fail
- Boyhood's refreshingly unsentimental take on motherhood
Subscribe to the Week